Emissions targets may come at a high price

 

Critics say the climate change Bill asks the Republic to do more than its partners and competitors in Europe, writes BARRY O'HALLORAN

THE COST of the greenhouse gas reduction targets set in the Government’s climate change Bill could hit €400 million a year over the next decade and leave the State facing a bill similar to the cost of the bank bailout every year by the middle of the century, according to some estimates.

The Climate Change Response Bill, published the day before Christmas Eve, sets an immediate target of cutting the Republic’s greenhouse gas emissions by a total of either 26 or 30 per cent over the 12 years from 2008 to 2020.

After that, it sets out even more ambitious targets, with a 40 per cent cut relative to 1990 levels by 2030 and 80 per cent relative to 1990 levels by 2050. The 2030 and 2050 targets were agreed by various international gatherings, and all developed economies have to meet them.

The targets, set out in the legislation which Green Party Minister of State Ciarán Cuffe will shepherd through the Oireachtas, look more ambitious than the 20 per cent reduction by 2020 required by the EU.

The legislation does not say if the 2.5 per cent annual reduction is compounded; if it is not it would mean a reduction of 30 per cent or 21 million tonnes. If it were compounded that would mean a 26 per cent reduction or 18 million tonnes, which is still above the EU target.

The Economic and Social Research Institute (ESRI) last month published a report suggesting that while the recession should ensure that the Republic hits its short-term goals, it is unlikely to do the same in 2020.

The Environmental Protection Agency (EPA), a State body, is also sceptical about the likelihood of reaching the 2020 target.

The point from which the State has to start cutting greenhouse gas emissions is 69 million tonnes a year. A best-case EPA estimate sees the Republic cutting this to 55 million tonnes by 2020. This assumes that every possible measure is taken and that all proven technologies that become available in the period are used.

Achieving this would bring the Republic within the initial EU target, which would require a reduction of 14 million tonnes a year. However, it would leave it short of the 18 million tonne cut that the climate Bill demands.

When it published the Bill on December 23rd, the Government did not say what it expected the measures proposed in the legislation to cost either the State itself or the economy generally.

The Department of the Environment says that the legislation involves reorienting the economy to a low-carbon, environmentally sustainable model.

Its spokesman points out that the costs of doing nothing about climate change could be far higher than the expense involved in tackling it. At the same time, a number of multinational employers have lobbied the Government asking for climate change legislation with concrete targets.

Neil Walker, head of energy and environment policy at employers’ body Ibec says that the Bill as it stands poses an immediate threat to competitiveness because the Republic is being asked to do more than its trading partners and competitors in Europe.

The EU targets were set before the financial crisis beggared the Republic and while it was one of the union’s wealthiest nations. As it is both European and global policy to make richer countries carry more of the greenhouse gas reduction burden, the Republic wound up with some of the highest targets in the EU.

Walker points out that some eastern European countries, which compete with the Republic for valuable manufacturing jobs, will have to do little or nothing about their emissions, and could even be allowed to increase them.

Along with this, Walker says that the Government has decided to go further than the EU targets, placing a further competitive burden on the State.

Walker argues that given the Republic has gone from one of the EU’s wealthiest economies to one struggling with an €18.7 billion deficit, the Government should be seeking to have its targets reduced.

There are no definitive costs for actual task of reducing greenhouse gas emissions. But Government-funded research indicates that it could be expensive.

Work carried out by the Energy Policy and Modelling Team at University College Cork’s Environmental Research Institute shows that the current annual cost of carbon reduction is €15 a-tonne, much of this is down to the Government’s carbon tax.

By 2020, the institute’s figures calculate that this could rise to €42. At this rate, the total bill for the Government target would be €756 million a year, which is around €200 million more than the EU target.

It is unlikely that every tonne of greenhouse gas that is cut from the Republic’s emissions would cost €42. Dr Brian Ó Gallachóir, the principal investigator in energy policy, says that the figures represent the marginal cost, which is the most expensive.

Cutting carbon emissions would be relatively cheap to start with as there are some steps that can be taken quickly and inexpensively. However, the cost rises as the process continues. Ó Gallachóir says that the marginal cost is “the cost of squeezing out the last tonne of carbon”.

The institute’s figures are focused on energy use, which accounts for two-thirds of all emissions.

Taking the institute’s figures and a target of 30 per cent reduction by 2020, Ibec says that the Republic could end up spending €400 million a year. Transport and electricity generation would have to carry the burden of this cost, as both activities require large amounts of fossil fuels. Business and industry, the big consumers of transport, will have to carry part of this cost.

These figures assume that everything that can be done to cut greenhouse gas is done, up to and including planting more forests to soak up carbon dioxide in the atmosphere. So there is no wriggle room.

The Environmental Research Institute’s figures indicate that after 2020, there is a mountain to climb. By 2030, the cost will have more than doubled, while emissions will have to cut to around 40 million tonnes a year. At the 2050 mark, emissions will have to be down to 11 million tonnes a year. Walker argues that this is an impossible task, and will result in an annual cost to the economy equivalent to a bank bailout.

Ibec calculates that at that point, the Republic will be spending €7 billion a year more than the EU targets required, because, when the process started, it embarked on a more expensive route to begin with.

A back-of-the-envelope calculation suggests that the total bill at this point could be close to €15 billion. But the real sticking point here is one of the Republic’s most important industries, farming, which is worth around €25 billion a year to the economy, before factoring in the food processing business that it underpins and which is a key exporter.

Farming produces around 17 million tonnes of greenhouse gas every year, partly thanks to famous belching cows and partly because of other, mainly naturally occurring processes.

Both Walker and Ó Gallachóir agree that there is very little that can be done to cut these emissions. “We would have to simply shut down agriculture to meet the target,” Walker argues.

Apart from the economic fallout, he says that this would make little or no sense. Most of the Republic’s agricultural products are exported, if production stops here, some other country would step into the breach, possibly cutting down thousands of acres of rainforest in the process.

Walker stresses that Ibec supports the principle of climate change legislation, but he says that the Government has allowed until January the 28th for consultation.

Its choice of targets is misplaced, he says. “It’s like the charge of the light brigade, they’re going after the wrong guns,” he says, “and we all know how that turned out.”